Aboitiz Group energy unit Aboitiz Power Corp. made good use of hedging to head off losses in its power supply agreements through a straight pricing scheme.
The practice prevented the company from suffering the ordeal of SMC Global Power which claimed to have accumulated losses of P15 billion from two straight-pricing PSAs with dominant distributor Manila Electric Co.
AboitizPower President and Chief Executive Officer Emmanuel V. Rubio said "as a result of good planning and forecasting, the company was able to manage its fuel cost, honor its fixed priced contracts and protect its customers."
Rubio said in the midst of rising commodity prices and a weak peso, the company was able to protect its financial health by being "completely hedged on its fixed priced contracts".
"We have had a comprehensive hedging program for commodity and currency as early as 2018," according to Rubio.
AboitizPower recorded consolidated net income of P9.6 billion for the third quarter of 2022, 72 percent higher than the P5.6 billion recorded in the corresponding period in 2021.
The company also recognized non-recurring gains of P310 million during the period from the P41 million in one-off losses recorded during the same period last year.
Without these gains, core net income for the third quarter of 2022 was P9.2 billion, 65 percent higher from a year ago.
This was primarily due to fresh contributions from GNPower Dinginin Units 1 and 2, higher water inflows, and gains from commodity hedges.
"We have seen the peak energy demand cotinuing its pick up in Luzon and Visayas during this past quarter, exceeding pre-pandemic levels. Our new capacities have been delivering much-needed energy to the grid during its commissioning period," Rubio stressed.
"Now that we have taken over these facilities, we look forward to reinforcing our support for the country's growing power requirements."
RE, new profit driver
"We remain focused on our objective to grow our renewable energy portfolio, with our latest foray into wind power taking us closer to our targets. At the same time, we are ensuring our existing facilities continue to meet the Philippines' baseload needs," Rubio added.
Without the one-off gains, the company's core net income for the first nine months of 2022 was P18.3 billion, 17 percent higher than the P15.7 billion recorded in the same period in 2021.
If the company excluded the impact of typhoon "Odette," liquidated damages and business interruption claims recognized last year, the first nine months of 2022 would have resulted in a 33 percent gain in core net income and a 42 percent gain in consolidated net income compared to the same period in 2021.
This was primarily due to fresh contributions from GNPD Units 1 and 2, higher availability of the GN Power Mariveles Energy Center Ltd. Co. facility, higher water inflows and gains from commodity hedges.